Edge, Tech Giants Facing Increased Scrutiny, but Regulatory Risk Seen More Long Term

"It does seem that big tech has gone from being darlings to the doghouse pretty quickly," said Washington Analysis senior telecom, media and tech analyst Thomas Seitz. "The progressive wing of the Democrat Party seems to have become skeptical of their power, and Republicans were never really good friends of big tech. But does that mean anything?" He said the FCC lacks jurisdiction; the FTC lacks three of its five commissioners, complicating major action; and Congress seems unlikely to act for now.

News reports indicate the political environment for "big digital platform companies, particularly Facebook and Google, has suddenly turned negative and the companies for the first time face real threats of regulation and antitrust action, similar to those they already face in Europe and other countries," said New Street Research (NSR) analysts in an investor note Sunday, which cited their adviser Blair Levin. "The reports are accurate in noting the voices of criticism span a broad political spectrum, which often is the precursor to a significant government action. Nonetheless, we don’t see the volume or breadth of the commentary leading to action."

"For investors, the discussion to date is more noise than signal," the NSR analysts said. "The threats are far more likely to arise in other countries or through private antitrust action. Further, we see no signs that governments in the United States are likely to act in ways that provide potential competitors to the data platforms advantages that improve their own prospects for competing with such platforms."

Brake agreed. "Despite all the noise, we are unlikely to see a historic shift in antitrust thinking or serious regulation any time soon," he said. "Demagoguery and the magic wand of 'gatekeeper' went a long way in the net neutrality debate, but I don’t see those tactics carrying as well against the consumer welfare standard. This doesn’t mean all is well. This new narrative poses a major threat to the advancement of pro-innovation, pro-growth policies around the world. Continued denigration of the most successful U.S. companies will feed the headwinds, especially with growing nationalism and increasingly protectionist policies gaining traction abroad.”

Open Society Foundations Fellow Gigi Sohn said she generally agrees "there's not going to be much action in the near term," though she called the Stop Enabling Sex Traffickers Act (SESTA) a possible exception. "It's got bipartisan support, sympathetic victims, horrific crimes" and "the tech companies have gone from 'No and Hell No,' to 'let's work together,'" she said. "So it's a near-term possibility."

Longer term, Sohn said momentum is building for antitrust changes to constrain market consolidation and harmful practices across industry. "Something needs to be done to antitrust laws to reflect reality," said Sohn, a former aide to then-FCC Chairman Tom Wheeler. She also said privacy remains a big concern. "People really do care about their privacy; they just don't know what to do about it." She backs a "level playing field" for both broadband and edge providers, an approach she said wouldn't put edge providers out of business despite their regulatory fears.

“Google and Facebook face more serious government accountability risk than most appreciate," emailed Scott Cleland, chairman of NetCompetition, which is backed by broadband interests. "They are too big to be unaccountable. Big is not bad, but big unchecked power is bad. This obvious bad problem has rapidly crystalized, but solutions remain embryonic. ... The single biggest solution and accountability risk would involve antitrust cartel enforcement of Google and Facebook for apparently dividing up the digital advertising market in 2014, when they abruptly stopping fiercely competing directly with each other in social and search advertising, and then they rapidly benefited from expanding their joint share of digital advertising revenue growth to over 95% in a little over two years.” Google and Facebook didn't comment.

Sohn suggested vested interests may be helping fuel the edge regulation speculation. "I’m suspicious that certain opponents of net neutrality have been very eager to push this meme, while at the same time avoiding scrutiny for their own actions," she said. NSR offered a similar view: "Google, Facebook, Amazon, as well as Microsoft and Apple are among the largest companies in the world and their rise has led to the decline of others, some of whom might wish to use government to stem the tide."

Cleland said edge providers largely have themselves to blame. "Consider: their reported election role in Russian fake news, fake ads and fake objectivity; their reported societal role in enabling hate speech and hate ads; their reported political role in opposing bipartisan SESTA legislation that would tweak their Section 230 immunity from liability to not apply to enabling child sex trafficking; Facebook’s reported live broadcasts of rape, torture, murder; Google and Facebook’s enablement of terrorist recruitment, while opposing being subject to [Communications Assistance for Law Enforcement Act]; their lack of ownership or cross-ownership limits; and their lack of any FCC public interest obligations for national security, public safety, law enforcement, emergency preparedness, emergency services, universal service, non-discrimination, privacy, indecency, [equal employment opportunity], consumer protection, etc."